Every industry and every population makes up a bell curve. A bell curve shows normal distribution in the shape of a graph that is highest in the middle and lowest on the sides. For example, most numbers tend to be in the middle, but as you move to either side of the bell curve, numbers get fewer. Those at the top of the bell curve and those at the bottom make up the extremes.
In production agriculture, I've observed that the bell curve is getting wider. There is more variance between the best and the worst. Return on equity would be an example.
Farming is not the only industry where this is occurring. Take the airline industry: Southwest Airlines made the top 10 most admired companies in America, and they are making good profits. Most others are in the red and near or in bankruptcy.
The automobile industry is similar. In 2004, Toyota earned more than $10.3 billion, more than the combined profits of GM, Ford, Daimler-Chrysler and Volkswagen.
Retailing is also similar. Wal-Mart and Kmart both started in business in 1962. Kmart is emerging from bankruptcy and Wal-Mart is now the largest retailer on the planet.
Interestingly, they both have operated in the same industry, under the same conditions, same inflation rate and same interest rates. However, slightly different plans and strategies have produced amazingly different results.
I believe there is more opportunity for variance in the bell curve in our industry. We've seen a variance of return on equity from 3% to 4% on average for farming to more than 15% for our client base in 2003. I think 2004 will see even greater variance.
That presents big problems for those at the bottom of the bell curve, since they will likely not stay in the industry. But this also presents huge opportunity for those at the top of the farming race.
To move to the top you need to search out and analyze new tools, technologies and management practices in marketing, equipment, labor and agronomic management.
They are available to everyone but only leveraged by a few. We have documented evidence that profitability is not a function of size, location of your operation or enterprise.
When you search out new tools, technologies and best management practices, and put them into place, it can really add to your farm's bottom line.
Farming Is Free Enterprise At Its Best
We should be thankful that we farm in a free country, and notwithstanding certain rules, we can do as we wish. That opportunity creates the bell curve of production agriculture. Without those opportunities we would all have the same lifestyle and likely have little opportunity.
In 1993, I traveled to Eastern Europe with a number of people to explain some of the things we do in America in production agriculture. One of the people traveling with me was Delbert Heisterkamp from Onawa, IA. Heisterkamp was a longtime owner of the John Deere dealership in Onawa and one of my longtime friends and mentors.
We met Antoine in Czechoslovakia. Antoine had waited 42 years to rebuild his family's dairy business. He and his family were forced by the Communists to leave their farm when Antoine was 14 years old. He never forgot what it was like to own and operate his own business.
This experience, plus others, made me a student and supporter of our free-enterprise opportunities. We need to cherish those opportunities, cultivate them in our young people and find ways to promote them in other enterprises. Farming is entrepreneurship at its best and you should be proud of promoting it to your sons and daughters.
Entrepreneurship is learned early and never forgotten. Many of the people who didn't remember when Czechoslovakia was free did not have that desire. I met several of them in Prague and it was a totally different experience than meeting Antoine.
Luckily history moves quickly enough to allow those who appreciated free enterprise to rekindle it.
Moe Russell is president of Russell Consulting Group, Panora, IA. Russell provides risk management advice to clients in 20 states. For more risk management tips, check his Web site (www.russellconsultinggroup.net) or call toll-free 877-333-6135.